The latest Hometrack UK Cities House Price Index has revealed that London recorded growth of 7.3% over 2016. This is the lowest annual rate for more than 3 years as impetus for house price growth is shifting from the capital to regional cities.
According to the report, strengthening market conditions and high demand has propelled Manchester's house prices by 8.9% over the last 12 months - the highest rate of annual growth in the city since July 2005.
The headline rate of the Index stands at 7.2%, down from 7.7% in 2015. However growth in the final quarter of the year bounced back (+2.2%) after weak growth over Q3 (+0.3%) following the Brexit vote.
London is now the seventh ranked city in Hometrack’s house price growth rankings. Other cities to outperform London over the last 12 months include Oxford (8.1%), Portsmouth (8.0%), Southampton (7.9%) and Birmingham (7.5%). In the capital house prices are now on average 14.2 times earnings, which is a record high level of housing unaffordability and points towards a period of price re-adjustment over the coming years.
The only city to surpass the growth seen in Manchester was Bristol, where prices increased by 9.6% over the last 12 months, although affordability pressures here are expected to lead to a slowdown in growth in 2017.
Richard Donnell, Insight Director at Hometrack, said: “This latest UK city house price index reveals how the impetus for house price growth is shifting to more affordable cities where the recovery in house prices has been more muted in recent years. Price rises are gaining momentum in cities where low mortgage rates are yet to be fully priced into housing.
In Manchester the underlying market conditions remain strong, with the supply of homes for sale only just managing to keep pace with demand. This is keeping the upward pressure on house prices. A similar picture is emerging in other regional cities such as Birmingham and points to continued, above average price inflation in regional cities over the next 12 months.
2017 looks set to be a year when the north-south divide for house prices might finally start to narrow once again.”